London threatened by chronic skills shortages

Employers in London are suffering from a chronic and growing shortage of skilled staff and half say that they are now depending on migrant workers to plug the gap.

A new survey from UK employers' group the CBI and consultants KPMG has found that skills shortages are now the biggest barrier to business in London, with two-thirds of employers expecting them to be the biggest obstacle to growth over the next six months.

The figure marks a big rise on the same time last year, when just over half said that skills shortages were their biggest issue.

Upward pressure on wages - a likely side-effect of the skills shortage and a lack of affordable housing - is employers' other major concern.

Half of employers (48 per cent) said that they are relying on staff from other EU countries to deliver the skills that they need, while more than a third (37 per cent) have taken on non-EU workers.

Yet while the report argues that migrants are not a long-term solution to the skills gap, it also reveals widespread scepticism about the latest government-backed initiative to boost the skills of the capitals indigenous workforce.

Some six out of 10 employers said that they have little confidence that a new joint skills project by the Government and the Mayor of London will deliver a workforce fit for business' purpose and a less than a quarter (23 per cent) believe it will.

Meanwhile, many employers have invested in improving their workforce's skills. Eight out of 10 have given employees training for their current job and two-thirds have sent staff on courses to raise the quality of service they offer. The same proportion have organised leadership or management courses.

CBI Director-General Richard Lambert said that the survey laid bare the scale of the skills shortages which employers are facing.

"In the short term, firms will hire economic migrants to fill the gaps but this is not a sustainable long-term solution," he added.

"If we are to maintain our pre-eminence we need to instill in our home-grown school-leavers and graduates the skills they need to compete in today's globalising world."

Compared to cities like Tokyo and New York, respondents said London is an attractive international business destination, and is highly rated for its employment opportunities and its cultural life. But it fared badly on work/life balance, public services, and value for money and measured up particularly poorly on transport infrastructure.

The availability of good quality, affordable housing also emerged as a major issue, with half of employers saying that this is driving up costs through higher wages and the same proportion say it is affecting recruitment of new staff.

KPMG London senior partner Ian Barlow warned that the survey underlined just how far skills shortages threatened to undermine London's role as a driver of the UK economy.

"In today's world of mobile capital our reputation as a world city, as the place where all international businesses need to come to do business, depends on continuing to have a workforce with the right skills and mindsets," he said.

"Whilst the influx of talent from outside the UK has been very welcome, we really must do more to skill up Londoners. It's economically wasteful and morally simply wrong for there to be some 400,000 unemployed in London when there are so many job opportunities."